Ending Wealthfare As We Know It

A reform to stop legal bribery in Wisconsin

Posted: May 3, 2011
Revised: June 29, 2011

Less than 1% of the population pays for all the election campaigning by Wisconsin politicians. After buying the elections, that tiny fraction of our society ends up owning our government. The politicians they paid to elect then return the favor with what amounts to “wealthfare” payments – tax breaks, pork barrel spending, patronage jobs, no-bid contracts for state government work and other special benefits. The huge special interest donations that fuel modern political campaigns are, in effect, legal bribes.

Ending Wealthfare As We Know It is a new approach to comprehensive campaign finance reform that aims to replace this big-money plutocracy with a small-dollar democracy. It tackles legal bribery by sharply lowering limits on the size of allowable campaign contributions to candidates for state office. It further attacks the wealthfare system by creating strong incentives for candidates to seek support from the communities they will represent if elected rather than outside interests, and by incentivizing greater participation by small donors who live where the candidates are running.

The centerpieces of this reform initiative are a public matching program for small-dollar political donations, a tax credit for small contributions, significantly tighter limits on campaign giving and far greater disclosure and accountability. This approach is based on the idea that we can improve state elections and state government in Wisconsin by: 1) giving ordinary citizens who lack the means to donate large sums of money to political campaigns a more meaningful role and more prominent voice in the electoral process; and 2) making it possible for candidates to run competitively for office without having to rely on a small number of wealthy special interest benefactors.

A core feature of traditional public financing systems – including the one adopted in Wisconsin in the late 1970s – is a requirement that candidates limit their campaign spending in order to receive public grants. Wisconsin’s system operated effectively in the beginning and held down election spending for a number of years because all campaigning at the time was done through candidate committees. But in the mid-1990s, Wisconsin started seeing election advertising sponsored by outside interest groups and by 1998 spending on this so-called “independent” electioneering reached seven figures. This activity escalated steadily over the next decade and was put on steroids when the U.S. Supreme Court ruled in January 2010 that corporations and other interest groups can spend unlimited amounts of money to influence elections. In 2010, there was more than $19 million worth of outside spending done by interest groups in state elections.

Limits on candidate spending in exchange for public grants have become problematic given this new electoral landscape. Accepting public financing effectively requires candidates to disarm unilaterally and more or less become bystanders in their own races, with their own spending limited while interest groups are able to spend as much as they want. As a result, there has been a wholesale abandonment of Wisconsin’s old public financing system by virtually all candidates involved in remotely competitive races. Ending Wealthfare As We Know It moves away from this old model and makes candidates relevant again by removing spending limits as a condition for receiving public financing benefits, thereby allowing them to compete more freely while still weaning them from a heavy reliance on legal bribes from big-money special interests. At the same time, this new approach makes interest group spending more transparent, accountable and democratic by requiring outside spenders to not only fully disclose their funding sources but also get permission from their shareholders or members to engage in election spending.

Another problem with traditional public financing programs is they typically provide flat grants to participating candidates regardless of the competitiveness of an election or the viability of a candidate. This new approach solves this one-size-fits-all problem by basing public financing benefits on the degree of interest in an election, the amount of effort candidates put forth and the level of support they demonstrate. This prevents the waste of taxpayer money on low-interest elections or fringe candidates with little or no public support.

Key Features

Public matches of small donations to participating candidates if the contributions come from people eligible to vote for them.

An Election Participation Incentive program providing a $25 tax credit to individuals ($50 for couples filing jointly) for small campaign contributions made to candidates the donor is eligible to vote for.

Sharply reduce the limits on campaign contributions to candidates for state office – cutting in half the allowable donations to legislative candidates and making larger reductions in the limits on donations to candidates for statewide office.

Close the “magic words” loophole in state law, requiring interest groups to register as political action committees and fully disclose both the amount and source of money spent on campaign advertising and other forms of electioneering as well as comply with contribution limits for PACs.

Require corporations to notify shareholders and obtain a majority’s approval in order to spend corporate funds on political activities. Similarly require cooperative associations to notify their members and get the majority’s approval of political spending.

Applies to elections for Assembly, Senate, Governor, Attorney General, Supreme Court and all other statewide offices.

Program Specifics

Public financing

Match small donations to participating candidates from qualified electors (individuals eligible to vote in the election for the office the candidate is seeking).

Up to $50

$4 public match for every $1 donated

Over $50 & up to $100

$3 public match for every dollar

If donors making small contributions for which matching funds are sought go on to donate above the threshold levels, matching funds to the candidate are reduced accordingly.

Qualifying for public financing

To be eligible to receive public matching funds, candidates must collect twice the number of signatures of qualified electors on nomination papers required under state law for each office.

Campaign contribution limits for state offices

Office

Individual

Single Committee

All Non-Party Committees

All Committees Including Parties

GOVERNOR current law

$10,000

$43,128

$485,190

$700,830

PROPOSED

$1,000

$1,000 (non-party)
$4,000 (party)

$50,000

$70,000

LT. GOVERNOR current law

$10,000

$12,939

$145,564

$210,259

PROPOSED

$1,000

$1,000 (non-party)
$4,000 (party)

$15,000

$25,000

ATTORNEY GENERAL current law

$10,000

$21,560

$242,550

$350,350

PROPOSED

$1,000

$1,000 (non-party)
$4,000 (party)

$25,000

$35,000

SUPREME COURT current law

$10,000

$8,625

$97,031

$140,156

PROPOSED

$1,000

$1,000

$10,000

$10,000

STATE SUPERINTENDENT
current law

$10,000

$8,625

$97,031

$140,156

PROPOSED

$1,000

$1,000

$10,000

$10,000

STATE TREASURER current law

$10,000

$8,625

$97,031

$140,156

PROPOSED

$1,000

$1,000 (non-party)
$4,000 (party)

$10,000

$15,000

SECRETARY OF STATE
current law

$10,000

$8,625

$97,031

$140,156

PROPOSED

$1,000

$1,000 (non-party)
$4,000 (party)

$10,000

$15,000

SENATE current law

$1,000

$1,000

$15,525

$22,425

PROPOSED

$500

$500 (non-party)
$2,000 (party)

$7,500

$11,000

ASSEMBLY current law

$500

$500

$7,763

$11,213

PROPOSED

$250

$250 (non-party)
$1,000 (party)

$3,750

$6,500

COURT OF APPEALS, CIRCUIT
COURT & DISTRICT ATTORNEY
current law

$1,000 to
$3,000

$1,000 to
$3,000

$38,813 to
$72,776

$56,063 to
$105,121

PROPOSED

$1,000

$1,000

$8,000

$12,500

INDIVIDUAL TO PAC current law

Unlimited

PROPOSED

$1,000 per calendar year

CORPORATE/UNION TO PAC current law

Prohibited

PROPOSED

Prohibited

PAC TO PAC current law

Unlimited

PROPOSED

Prohibited

PARTY TO PAC current law

Unlimited

PROPOSED

$6,000 per calendar year

PAC TO PARTY current law

$6,000 per calendar year

PROPOSED

$3,000 per calendar year

CONDUIT current law

Unlimited

PROPOSED

Single non-party committee limit for each office

LCCs current law

$6,900 for senate & $3,450 for assembly

PROPOSED

Single non-party committee limit for each office

Both conduits and Legislative Campaign Committees (LCCs) lose their special status in state law and are treated as non-party committees subject to the same contribution limits as those committees.

Contribution limits apply to all state elections, including special elections and recall elections. In addition to the limits described above, an individual may not contribute more than $10,000 each calendar year to any combination of Wisconsin candidates or political committees under current state law. That annual aggregate limit is reduced to $1,000 under this proposal.

Tax credit for small campaign contributions

Individual contributions of up to $100 to Wisconsin candidates the donor is eligible to vote for would qualify for a $25 income tax credit ($50 for joint filers) under the Election Participation Incentive program. Tax filers seeking the credit would be required to obtain a receipt from the candidate’s campaign committee verifying the contribution.

Disclosure of interest group campaign advertising and other electioneering

To ensure full disclosure of all election communications, the “magic words” loophole is closed by adding the following language to the definition of “political purposes” in state law: “A communication that is susceptible of no reasonable interpretation other than as an appeal to vote for or against a clearly identified candidate. A communication is susceptible of no other reasonable interpretation if it is made during the period beginning on the 60th day preceding an election and ending on the date of that election, and includes a reference to or depiction of a clearly identified candidate and: 1) Refers to the personal qualities, character or fitness for office of that candidate; 2) Supports or condemns that candidate’s position or stance on issues; or 3) Supports or condemns that candidate’s public record.”

The definition of “communication” is amended to read: “‘Communication’ means any printed advertisement, billboard, handbill, sample ballot, television or radio or internet advertisement, automated telephone call or e-mail directed to more than 500 persons, and any other form of communication that may be utilized for a political purpose.”

To make sure the origin of funds used for election communications is known and stop what amounts to legal laundering of money used for political purposes, the definition of “contribution” in state law is changed from a “gift, subscription, loan, advance, or deposit of money or anything of value . . . made for political purposes” to a “gift, subscription, loan, advance, or deposit of money or anything of value . . . made or used for political purposes.”

To accommodate the U.S. Supreme Court’s 2010 ruling in Citizens United v. Federal Election Commission, corporations or associations organized under chapters 185 or 193 of the Wisconsin statutes may make independent disbursements from a registered account other than a political committee as defined in current state law, but must disclose all contributions made or used for political purposes, comply with all other registration and reporting requirements in state administrative rule GAB 1.91, and meet new requirements to notify shareholders or members and get their approval of any election spending.

Shareholder notification and approval of corporate political spending

In order to use $10,000 or more of corporate treasury funds for political purposes, corporations must obtain annual shareholder authorization. A resolution must be presented to shareholders for a vote requesting the authority to spend a maximum dollar amount in the next 12 months and specifying whether the corporate treasury funds are intended to support or oppose specific candidates or referenda, or are to be paid to specific tax exempt organizations or trade associations for political activities.

The resolution must be approved by a majority of shareholders, defined as 50 percent plus one of all outstanding voting securities. Shareholders not casting votes do not count toward affirmative authorization of the resolution. In addition, any proxy or consent or authorization for an annual meeting of the shareholders of a corporation or any special meeting in lieu of an annual meeting where proxies are solicited must provide for a separate resolution subject to a shareholder vote to approve any spending of $10,000 or more by the corporation for political purposes.

At least quarterly during each fiscal year, a corporation that uses treasury funds to make direct or indirect contributions or expenditures for political purposes must notify its shareholders in writing of the nature of the activities, including the date and amount of any contributions or expenditures, the identity of any candidate or referendum targeted, and whether the contributions or expenditures were made in support or opposition. These quarterly reports of political activities are public records.

The shareholder vote to approve or disapprove any spending of $10,000 or more is binding on the corporation and if a corporation makes an unauthorized contribution or expenditure for political purposes, then the directors at the time the unauthorized action occurs are personally liable to repay to the corporation the amount of the unauthorized expenditure with interest at the rate of 8% per year.

Cooperative associations using treasury funds to make contributions or expenditures for political purposes are subject to the same requirements as corporations and must notify their members and obtain annual approval of any spending of $10,000 or more in a year.

Funding Sources

Establish a “Wisconsin Clean Election Fund.”

Annually designate $10 per state taxpayer from the state general fund to the Wisconsin Clean Election Fund (WCEF).

Allow individual taxpayers to steer their share of WCEF funds to the political party of their choice, and also allow them to opt out of the program and redirect the $10 designated to the WCEF to other general state purposes.

Create a Public Integrity Endowment program allowing individuals and corporations to make tax-deductible donations of any size, with proceeds going to the WCEF.

Prohibit campaign “war chests” and require all candidates for state office to dispose of any unspent campaign funds after an election. Any unused public funds are returned to the WCEF. Any unspent private donations must either be returned to the contributors, donated to charity or deposited in the WCEF.